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Audit Finds Indian Army Flouting Procurement Rules

An internal audit by India’s defense ministry has concluded that violations of procurement rules by the Indian army has resulted in the loss of more than 1 billion rupees ($18.6 million) in public funds during the two fiscal years since April 1, 2009.

According to the 118-page audit report, equipment such as bulletproof jackets, night vision devices and parachutes were procured by the Northern Army commander between 2009-2011 from “unlisted and unregistered” vendors.

“A large number of stores in quite substantial quantities have been purchased, from intermediaries acting as trading outfits for importing the product from some foreign original equipment manufacturer vendors in a nontransparent manner, in violation of provisions of [the] defense procurement manual,” the report says.

“Under the cover of open tender inquiry, a large number of trading outfits, effectively acting as agents in a disguised form, have been able to grab orders for various stores and equipment,” it says.

Army commanders are entitled to spend up to 1.25 billion rupees under the Special Financial Powers for procuring equipment on an urgent basis for the troops under them. However, the army has denied violating any procurement rules.

The findings are “inaccurate, unsubstantiated and speculative,” an army spokesman says. “All procurements from Army Commanders Special Financial Powers are done through well laid out and time-tested procedures. All procurements of items from Army Commanders Special Financial Powers are vetted and concurred by Integrated Financial Advisors.”

The report recommends that the government not consider enhancing the delegated powers of these senior lieutenant generals. “The whole system of delegated powers available to Army commanders needs to be reviewed in the light of our findings and recommendations, before initiating any further action in the matter,” the report says.

The audit was performed by the comptroller of defense accounts at the direction of Defense Minister A.K. Antony.